TORONTO, March 13, 2017 /CNW/ - Global car sales continued to move higher in the opening month of 2017, even as most automakers reported lower sales in China due to an increase in the sales tax applicable on small vehicles with 1.6L or smaller engines. Global purchases advanced 3% above a year earlier in January as volumes in developing markets (excluding China) began 2017 with the strongest gain in nearly four years.

More recent data for February points to ongoing strength across North America. Purchases in Canada remained above an annualized two million units for the second consecutive month, climbing to a record high for February. The improvement was led by a 16% y/y surge in luxury volumes, as purchases of both luxury cars and trucks posted double-digit advances.

"The hot luxury auto market in Canada has accounted for nearly 60% of the year-to-date increase in overall volumes in the country this year, which is five times its normal share," said Carlos Gomes, Senior Economist and Auto Industry Specialist, Scotiabank. "The strength of the luxury market is concentrated in British Columbia and Ontario, the fastest-growing provincial economies."

In the U.S., car and light truck sales totalled an annualized 17.5 million units in February, in-line with the previous month's performance and the 2016 total. Retail activity continues to move higher even as fleet volumes have weakened. Automakers will ramp up production to record highs in the second quarter alongside favourable industry fundamentals. Rising vehicle assemblies are estimated to add an annualized 0.6 percentage points to economic growth in the April-June period, helping to lift overall US growth to 2.3% in 2017, up from 1.6% in 2016.

Continued gains in global car sales in early 2017 highlight the improving economic backdrop around the world and solidify the positive sales outlook, even as purchases in China moderate from last year's record-setting gain. During January, sales in developing markets of Asia, Eastern Europe, and South America accelerated to 6% y/y, the best performance since May 2013.

Other highlights:

Eastern Europe led the emerging market rebound in January alongside double-digit sales gains among many of the new EU members and an end to the downturn in Russia.

Asia has become the key driver of the global auto market in recent years and the sales acceleration outside of China in early 2017 bodes well for the outlook.

The South American auto market is on more solid footing with sales climbing 4% y/y in January, led by a double-digit advance in Peru.

Higher commodity prices, currency stabilization and some improvement in labour markets across South America are supporting the first annual sales increase since 2013.

Scotiabank provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.

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